AMARILLO, TX – When hiring an individual, it is important that the DME supplier check the applicant’s name against the OIG’s Exclusion List. On a regular basis, it is also important that the supplier check all of its employees against the OIG’s Exclusion List. If an employee of a DME supplier is on the Exclusion List, then the supplier can face severe repercussions including the obligation to repay all Federal health care program payments received while the excluded employee was employed by the supplier.
The following is Part One of a three part series addressing exclusion from federal health care programs. Part One addresses the OIG’s exclusion authority. Part Two addresses the procedure that the OIG follows in excluding an individual following a criminal plea. Part Three addresses possible options available to the owner of a DME supplier who has been excluded.
Section 1320a-7 of the U.S. Code provides the Secretary of Health & Human Services the authority to exclude individuals and entities from participating in federal health care programs for a variety of offenses. Depending on the particular situation, exclusion from participation in federal health care programs may be either mandatory or permissive.
Exclusion is mandatory for convictions of:
(1) program-related crimes (i.e., offenses related to the delivery of an item or service under Title XVIII or State health care programs);
(2) patient abuse or neglect;
(3) felony convictions related to health care fraud—
[C]onvict[ion] for an offense . . . under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in paragraph (1)) operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct; and
(4) felony conviction relating to the unlawful manufacture, distribution, prescription, or dispensing of controlled substances.
There are 16 different statutory grounds under which an individual or entity may receive permissive exclusion. For example, Section 1320a-7(b)(1) of the Act states, in relevant part, the following:
The Secretary may exclude the following individuals and entities from participation in any Federal health care program . . .
(1) Conviction relating to fraud.—Any individual or entity that has been convicted for an offense which occurred after August 21, 1996, under Federal or State law—
(A) of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct—
(i) in connection with the delivery of a health care item or service, or
(ii) with respect to any act or omission in a health care program (other than those specifically described in subsection (a)(1) of this section) operated by or financed in whole or in part by any Federal, State, or local government agency; or
(B) of a criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct with respect to any act or omission in a program (other than a health care program) operated by or financed in whole or in part by any Federal, State, or local government agency.
As indicated above, an offense falling under Section 1320a-7(b)(1) does not automatically result in exclusion. The Department of Health and Human Services Office of the Inspector General (OIG) has wide discretion to permissively exclude individuals and entities. The OIG has a presumption in favor of imposing some period of exclusion against an individual or entity that has defrauded Medicare or any other Federal health care program. However, this presumption is rebuttable. The OIG has stated that it “evaluates health care fraud cases on a continuum” and that resolution of whether or not to exclude an individual or entity “is based on OIG’s assessment of future risk to the Federal health care programs.”
The OIG may forego exclusion if the individual or entity agrees to a corporate integrity agreement (CIA) in exchange for a release of the OIG’s Section 1128(b)(7) exclusion authority under the Social Security Act. The OIG can also implement “unilateral monitoring” which monitors the individual or entity’s compliance with federal health care programs.
The following are non-binding guidelines that the OIG uses in assessing whether to impose permissive exclusion. There are four categories, and each category has multiple criteria.
1) Nature and circumstances of the conduct.
- Adverse impact on individuals—conduct that poses physical or mental harm to patients or financial harm to the Medicare or any of the other Federal or State health care programs poses a higher risk.
- Financial loss—the greater the amount of actual or intended financial loss to federal health care programs, the higher the risk.
- Conduct that demonstrates a pattern of wrongdoing, occurrence over a substantial period of time, or continual or repeated conduct, or ongoing conduct indicates higher risk.
- Leadership Role—for an individual, if the individual organized, led, or planned the unlawful conduct, this indicates higher risk; for an entity, if individuals with managerial or operational control at or on behalf of the entity organized, led, or planned the unlawful activity, this indicates higher risk.
- History of prior fraudulent conduct, including a history of judgments, decisions, or settlements in prior federal or state criminal, civil, or administrative enforcement actions, or a prior CIA, indicate a higher risk on the compliance risk spectrum.
2) Conduct during the Government’s investigation.
- Obstructing or impeding, or attempting to obstruct or impede, an investigation, taking steps to conceal conduct from the government and others, and failing to comply with a subpoena in a reasonable time period indicate a higher risk on the compliance risk spectrum. Whereas prompt response to a subpoena is expected and does not affect the risk assessment.
- Internal investigation—conducting an internal investigation before becoming aware of the government’s investigation to determine who was responsible and sharing the results with the government, indicates lower risk. Additionally, self-disclosing problematic conduct as a result of the internal investigation prior to any awareness of the government’s investigation, lowers the risk on the compliance risk spectrum. A person that accepts responsibility for his or her conduct also indicates lower risk.
- Cooperation—cooperation with the government, or cooperation that results in criminal, civil, or administrative action or resolution with or against other individuals or entities demonstrates a lower risk.
- Resolution—an adverse licensure action; a criminal resolution (e.g., a “conviction” as defined at Section 1128(i), a Deferred Prosecution Agreement, or a Non-Prosecution Agreement); or the inability to pay monetary damages, assessments, and penalties to resolve a fraud case, indicates a higher risk.
- Significant ameliorative efforts. Significant changes in the entity—taking disciplinary action against individuals responsible for the conduct, devoting significantly more resources to the compliance function, whether “the entity has been sold in an arm’s-length transaction to a non-affiliated, independent third party with a history of compliant participation in the Federal health care programs” and similar activities indicates a lower risk.
- History of compliance. A prior history of significant self-disclosures made appropriately and in good faith to the OIG, the Centers for Medicare & Medicaid Services (CMS) for Stark law disclosures, or CMS contractors for non-fraud overpayments, indicates a lower risk on the compliance risk spectrum. The existence of a compliance program that incorporates the U.S. Sentencing Commission Guidelines Manual’s seven elements of an effective compliance program does not affect the risk assessment; however, the absence of such a compliance program indicates a higher risk.
Jeffrey S. Baird, JD, is Chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or firstname.lastname@example.org.
 42 U.S.C. § 1320a-7.
 Id. § 1320a-7(a).
 Id. § 1320a-7(b)(1) (emphasis added).
 Criteria for Implementing Section 1128(b)(7) Exclusion Authority, Office of the Inspector Gen., U.S. Dep’t of Health & Human Servs, (Apr. 18, 2016), https://oig.hhs.gov/exclusions/files/1128b7exclusion-criteria.pdf.